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Assume interest rates for bonds today is 5% for an AAA rated bond. Calculate the price of the bond you have selected relative to the 5%. Is the bond selling at a premium or a discount? Why? Be sure to show how you arrived at your answer. What other factors may influence the value of a bond?
You have been managing a $5 million portfolio that has a beta of 0.75 and a required rate of return of 14%. The current risk-free rate is 5.25%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.70, what wi..
You have been asked to calculate the cost of capital for a company with the following information. The company has $7,500,000 in face value bonds, trading at 96.5% of face value. The YTM on these bonds is 5.75%. The equity beta is 1.75, the expected ..
The exercise price on one of Flanagan Company's options is $14, its exercise value is $23, and its time value is $7. What are the option's market value?$ What is the price of the stock? $ What is the exercise value of the call option? $ What is the o..
Your firm has an average collection period of 39 days. Current practice is to factor all receivables immediately at a 2.00 percent discount. What is the effective cost of borrowing in this case?
Outline the basic formula for the weighted average cost of capital and explain how it is used in the capital budgeting process. your answer should be in your own words.
Project cash flow Eisenhower Communications is trying to estimate the first-year net operating cash flow (at Year 1) for a proposed project. What is the project's operating cash flow for the first year (t = 1)? If this project would cannibalize other..
Samantha has come to you for advice on her retirement planning. She is currently 55 years old and intends to turn her $675,000 current savings into an immediate annuity. Assume the annuity has a 5.00 percent annual interest rate, and is distributed a..
Broussard Skateboard's sales are expected to increase by 20% from $7.8 million in 2015 to $9.36 million in 2016. Its assets totaled $4 million at the end of 2015. Baxter is already at full capacity, so its assets must grow at the same rate as project..
Conduct a What-If Analysis: This what-if analysis concerns an unforeseen circumstance that could impact the company''s current health as well as its future plans.
You are considering a 10-year, $1,000 par value bond. Its coupon rate is 9%, and interest is paid semiannually. If you require an "effective" annual interest rate (not a nominal rate) of 11.52%, how much should you be willing to pay for the bond? Do ..
Six years ago you placed $ 250 in a savings account which is now worth $ 1,040.28. When you put the funds into the account, you were told it would pay 24 percent interest. You expected to find the account worth $ 908.80. What compounding did you thin..
Which of the following is (are) an example of short-run exposure to exchange rate risk:
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